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Why is healthy food expensive?

A friend of mine was complaining today about how healthy food is more expensive than unhealthy food, and implied that we wouldn’t have an obesity epidemic if things were the other way around. The suggestion is that people choose to eat unhealthy food because it’s the cheaper option; they would eat more healthily if that were cheaper instead.

That may be true to an extent, but it’s a chicken-and-egg scenario: a major reason that unhealthy food is cheap, is that it’s so popular. It’s a huge market, so producers, suppliers and retailers compete fiercely on price to get a portion of it. Also, because the market is so large, they can achieve economies of scale in the production of bad food.

On the other hand, healthy food is a much smaller market, so it’s more expensive to produce. It’s not worth it for retailers to make such big price cuts to increase their market share. And, they know that the people who buy healthier foods are conscientious consumers who have sought out those products for their healthy qualities, and are therefore willing to pay a premium. The result is that it makes basic economic sense for the food industry to continue charging higher prices for healthier food.

There are other factors too, external to the feedback loop of demand and low prices. Unhealthy food is generally bad because it contains a lot of fat, salt and/or sugar – ingredients which producers put into processed foods in large quantities precisely because they hit the pleasure centres in our brains and enhance our craving for more of that food type. They’re also very cheap ingredients, so for a manufacturer of processed foods, they’re an extremely cost effective option: he can increase customer satisfaction, and sell more of his product, while keeping the production cost low.

Also, the healthiest food is that which you cook yourself from fresh ingredients. That’s inherently less convenient than buying processed food and ready meals, which the producers stuff with fat, salt and sugar, to make it taste better and for preservation. Customers want convenience, and the majority opt for it. Those who’d rather have the healthy, less convenient lifestyle are in the minority, and so less interesting to retailers.

The demand for unhealthy food, therefore, is perpetuated by its taste and its convenience, as well as its cost; and its cost is low by its nature, and pushed down further by the competition driven by mass demand.

I actually wouldn’t be surprised if the margins made on the really expensive premium healthy ranges, sold to the discerning health-conscious consumers, were used to subside further discounting of the fatty, sugary pigswill sold to everyone else.

This isn’t going to change of its own accord. The economic reality, based on broad customer behaviour, overwhelmingly encourages the food industry to produce unhealthy food on large scales and sell it cheaply, while letting the prices of healthy food remain high. It’s no use appealing to the good nature of the producers to do anything different: as an industry they can only be expected to follow the most profitable path. I doubt trying to change consumers’ attitudes will have much effect either: several decades’ worth of information, advice and campaigning on healthy eating have created only a minority of people motivated enough to change their lifestyles accordingly. The vast majority will still choose the option that gives them taste, convenience and low food bills in the present, even though it’ll also give them heart disease, diabetes and cancer in the future.

If we really want to do something about this, the only effective way is to change the economic situation for food producers by regulation and taxation. Here’s an outrageous idea: introduce a VAT supplement for food. The rate is equal to the combined percentage of fat, salt and sugar in the product. Now producers have a financial incentive to keep those levels down, and consumers are nudged by pricing towards better choices. Fresh fruit and vegetables, lean meat and fish, and healthier carbohydrate options like couscous and rice, are suddenly the cheapest options in the shop.

The system could be developed and improved. Distinguish between different types of fat according to their level of toxicity. Add other ingredients to the tax calculation as research proves them to be unhealthy. Give an extra weighting to substances like salt, which have a disproportionately harmful effect in smaller quantities. The potential is enormous: we could construct a sophisticated economic system which tailors the nation’s eating habits towards a healthy ideal. The immediate tax revenue would pay for the organisation responsible for reviewing and updating the system, with surplus; in future decades, the savings in healthcare would be dramatic.

The food industry will fight it at first, but since they’ll all have to follow the same rules, they won’t be disadvantaged. There should be no concerns from a liberties perspective, since people will still have a free choice of foods. And the moral, social and economic arguments are impelling. Is it really such an outrageous idea after all?

4 thoughts on “Why is healthy food expensive?”

This is the thing you’ve written that I disagree with most. Mostly because of the your assumption, which is pretty much universal, that there’s such a thing as healthy food. Obviously there are ways of treating your body badly with food, but in general the things which we’re told are healthy change all the time, except in that they’re always exotic (this year counting calories, free radicals and pomegranates; last year Atkins, kale and antioxidants) . Exactly in the same way that fashion does, and not at all in the same way that science does. I’m all for taxing ingestibles which are well established as harmful (booze, cigarettes and, if they could be legalised, other drugs) – that way you can still eat what you want but the government, who have an interest in you not getting sick, can take a cut if you’re being reckless. But tax breaks for goji berries?

Actually I completely agree with you about faddish diets and “superfoods”, and I could write several more blog posts about those topics. When I say “healthy food” I’m not talking about particular food items which are from time to time promoted as having an especially positive effect on health. I’m as sceptical about those as you are. I’m just talking about a diet which avoids large amounts of fat, sugar and salt. The negative health effects of these in excess are well studied and documented, although you won’t see much about them in the media, because it’s not as exciting or profitable a story. The way to avoid large amounts of fat, sugar and salt is to cook your own food from fresh, simple, unprocessed ingredients.

Even when you think you’re buying healthy processed food, it probably isn’t. Plain porridge oats are healthy in moderation, but those individual packets of Quaker flavoured porridge oats – which are marketed to appeal to the desire to eat healthily – are about 20% added sugar, as well as 5% natural fat.

So I’m not suggesting a tax break for positively healthy food, spurious or otherwise; I’m suggesting a tax punishment for those basic constituents – fat, sugar, salt – which a huge weight of scientific literature has firmly established as having serious detrimental health effects.

Consumers would be forced to think a lot more about their choices if items they’re currently buying (with the idea that they’re healthy) were labelled as including a 25% unhealthy contents VAT supplement (as Quaker flavoured oats would be), and the producers of those foods would find it much harder to hoodwink consumers who want to eat healthily into buying harmful foods.

Well, maybe I guess. But fat, sugar and salt are all vital for survival and if you happen to be so poor that you struggle to afford food, it’s quite nice that these things are so cheap. Perhaps that’s a situation we’re too far removed from in England, so it doesn’t need worrying about. Your system, at any rate, seems more sensible than differentiating by law between cakes and biscuits for tax purposes.

But either way, an additional tax on non-goji berries is equivalent to a tax break for goji berries. As long as other things get the same tax break I suppose I don’t mind too much.

I just discovered accidentally that I can edit your comments, and potentially make you look like a complete idiot. I won’t do that though.

Yes – in small amounts. Fruit and vegetables will provide more than enough sugar, and even the leanest meats, as well as nuts and pulses, provide fat. It’d be nigh on impossible to follow a diet which completely avoids the VAT health supplement, and it would make a negligible difference to shopping bills compared with buying foods that include a 2-3% supplement and provide the RDAs of sugar, salt and fat. The idea obviously needs a lot more detailed work if it were ever to become actual policy, but as long as you accept that the general principle could work, I’ve achieved the purpose of the article.